This article has been reprinted from USDA's Nov. 14 Grain Transportation Report.
Compared to the previous quarter, transportation and landed costs of U.S. soybeans to Europe and China were mixed, but Brazil’s costs to the same destinations increased during third quarter 2019 (tables 1 and 2).
Transportation costs from Minneapolis, MN and Davenport, IA to both Europe and China declined as a result of improved navigation conditions on the Mississippi River system.
After being forced to close earlier in the year because of persistent flooding and navigation disruptions, the upper portion of the Mississippi River was reopened for barge transportation (see August 15, 2019 Grain Transportation Report (GTR)).
To account for the river closures, transportation cost comparisons were modified to include a rail-to-barge segment.
In this segment, soybeans were transported by rail from Minneapolis, MN and Davenport, IA to St. Louis, MO and then transferred onto barges for shipment to New Orleans, LA.
The river closures and substitutions of rail for barge raised transportation costs in the second quarter and lowered them in the third quarter when the river reopened.
At the same time, U.S. truck rates also fell, and bulk grain ocean freight rates rose, because of higher global demand for bulk items such as coal and iron ore (see October 31, 2019 GTR).
The drop in truck rates and costs associated with the barge-for-rail substitution along the entire route to New Orleans exceeded the increase in the ocean freight rates, and the net effect pushed total transportation costs down.
However, for shipments from Fargo, ND and Sioux Falls, SD through PNW, the increase in the ocean freight rates outweighed the decrease in the truck rates, causing total transportation costs to rise.
In Brazil, both truck and ocean freight rates increased during the quarter, pushing up total transportation costs.
Despite the increase in the U.S. soybean farm value, the lower transportation costs reduced landed costs from Minneapolis, MN and Davenport, IA to Europe and China, while landed costs from Fargo, ND and Sioux Falls, SD to China rose.
From the second to the third quarter, both Brazil’s soybean farm values and landed costs to Europe and China increased.
From the United States, landed costs to Hamburg, Germany were about $362-$365/metric ton (mt) (table 1) and to Shanghai, China were $374-$397/mt (table 2).
From Brazil, landed costs to Hamburg, Germany were $365- $402/mt (table 1) and to Shanghai, China were $374-$394/mt (table 2).
Because of lower transportation costs and higher farm values, U.S. transportation’s share of landed costs fell for shipments from Minneapolis, MN and Davenport, IA.
However, that share remained relatively stable for shipments from Fargo, ND and Sioux Falls, SD.
In Brazil, transportation’s share of landed costs increased. U.S. transportation’s share of landed costs to Hamburg, Germany were 16-17 percent (table 1) and to Shanghai, China were 22 to 25 percent (table 2).
Brazil’s transportation share of landed costs to Hamburg, Germany were 21 to 29 percent (table 1), and to Shanghai, China were 23 to 30 percent (table 2).
According to USDA’s grain inspection data, China imported 5.64 million metric tons (mmt) of U.S. soybeans during third quarter 2019 versus 3.54 mmt in the previous quarter and 0.38 mmt during the same period in 2018.